Correlation Between Planet Fitness and New Residential

Can any of the company-specific risk be diversified away by investing in both Planet Fitness and New Residential at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Planet Fitness and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Planet Fitness and New Residential Investment, you can compare the effects of market volatilities on Planet Fitness and New Residential and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Planet Fitness with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and New Residential.

Diversification Opportunities for Planet Fitness and New Residential

0.9

Correlation Coefficient

Planet Fitness  New Residential

Almost no diversification

The 3 months correlation between Planet and New is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Planet Fitness is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Planet Fitness are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Planet Fitness i.e., Planet Fitness and New Residential go up and down completely randomly.

Pair Corralation between Planet Fitness and New Residential

Assuming the 90 days horizon Planet Fitness is expected to generate 1.19 times less return on investment than New Residential. In addition to that, Planet Fitness is 1.79 times more volatile than New Residential Investment. It trades about 0.04 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.08 per unit of volatility. If you would invest  695.00  in New Residential Investment on October 23, 2024 and sell it today you would earn a total of  405.00  from holding New Residential Investment or generate 58.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Planet Fitness  vs.  New Residential Investment

Planet Fitness

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

New Residential Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and New Residential

The main advantage of trading using opposite Planet Fitness and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, New Residential can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in New Residential will offset losses from the drop in New Residential's long position.

The idea behind Planet Fitness and New Residential Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..